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December 12, 2012

A NASDAQ 100 Breakout?

The E-Mini NASDAQ 100 has been coiling within a rather tight range over the last two months, which could pave the way to an impressive breakout soon. Here's why...

Spring-Loaded

The daily chart of the E-Mini NASDAQ 100 futures contract shows price has been coiling like a spring since late October, which means we could see a potential breakout opportunity soon. Any time price trades in this type range contraction phase, we usually see a phase of range expansion ahead.

As a matter of fact, the coiled price action actually resembles an ascending triangle with a clearly defined resistance level of 2,700, which has held firmly over the last two months. Traditionally speaking, ascending triangles tend to break to the upside, but a breakout in either direction can occur.

Also, the triangle pattern has a backend measurement of about 200 points, which means we could see a move of around 200 points once a breakout occurs.

PEMA Breakout Setup

The daily chart also shows that a PEMA Breakout setup has developed, whereby the three pivot-based EMAs (13, 34, 55) flatten out right at the apex of the coiled pattern.

This setup lets you know that buyers and sellers are at an impasse, and to expect a resolution soon via a breakout.

You can learn more about this pattern, and others, in my free ebook HERE.

Levels to Watch

The overall long term trend direction is up and the triangle pattern has developed in an ascending manner, which both point to an upside break ahead.
Obviously, the NQ will need to see a breakout through 2,700 if further strength is to be seen.

If a breakout does indeed occur, we could see a slow and steady rally into the close of the year.

However, a breakout in either direction can occur, and both can be traded just the same. Keep an eye on 2,620 for a potential downside break. Such a break could spark a retest of prior lows at around the 2,500 level ahead.

Look for price to continue to develop within the triangle until a clear and decisive breakout occurs.

Let's see how this one plays out!

Happy Holidays!

We at PivotBoss have had an amazing year, and we want to send a giant "Thank You!" to all of our fans that have helped to make 2012 a success. Let's make 2013 even better! Read More of our Thank You HERE.